As two global superpowers fight a trade war, the collateral damage is being felt on Mayhill Street in Saddle Brook, on Empire Boulevard in South Hackensack, and in the industrial zones where machine shops and factories turn out made-in-New Jersey products.

The first round of tariffs in the trade war between the United States and China took effect in the spring, when the United States placed tariffs of 10 percent on aluminum and 25 percent on steel from China. In July, the United States added a 25 percent tariff on certain electronic components. President Donald Trump followed those last week with tariffs on hundreds of consumer goods from China.

The impact of the latest tariffs is expected to be felt broadly across America within a few months as retailers raise prices, but New Jersey manufacturers having been paying the price for those initial tariffs since March.

On Mayhill Street in Saddle Brook, Gary DuBoff, president and chief executive of Arrow Fastener Co., hears the talk about how the trade battle is being fought for freer and fairer trade, but it has put his company in a situation he finds distinctly unfair.

Arrow Fastener is an 89-year-old company that makes staples, staplers, staple and glue guns, and other work tools. The 350 employees working round-the-clock shifts at the site produce the most popular staple gun sold in America, with over 60 million in use on construction sites and in homes.

But the biggest impact of the trade war is on the smallest items the factory makes — staples.

The factory can make more than 100,000 packs of staples a day. Arrow employees like to point out that if all the staples they produce in a year were stretched end to end they could reach the moon, and three-fourths of the distance back to Saddle Brook.

A machine loads packages of staples into cartons at the stapler assembly line at Arrow Fastener in Saddle Brook.(Photo11: Mitsu Yasukawa/Northjersey.com)

To make those staples, Arrow imports steel from China. The sheets of steel – actually dozens of individual thin wires bonded together and fed into the staple cutting machine – are a niche product not made in the United States. Currently the only source is China, DuBoff said. The company has tried, without success, to find U.S. mills willing to make the specialty steel.

Since March 23, Arrow has been paying a 25 percent tariff on the steel it imports, adding more than $500,000 to the company’s costs over the past six months.

Adding insult to injury, finished staples made in China are not subject to a tariff, DuBoff said.

“The unintended consequences of this for us is we’re trying to keep jobs in New Jersey, in Bergen County, but we’re got this policy that says if you make them here you’re going to be penalized,” he said. “If you don’t make them here you’re not penalized. We don’t believe that’s fair."

DuBoff testified about the tariffs before the state legislature’s bipartisan manufacturing caucus in August and remembers one lawmaker shaking his head in disbelief when he heard that finished staples made in China were not subject to the same tariff.

“He said ‘Well, that makes no sense at all’,” DuBoff recalled. “And it doesn’t. It makes no sense.”

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Gary DuBoff, President of Arrow Fastener Co., Inc., stands in front of the assemble line, located at Saddle Brook on 09/20/18. This is for a story about North Jersey manufacturers who have been affected by the tariffs and already seeing an impact from the tariffs added over the summer. Mitsu Yasukawa/Northjersey.com

Mamta Rana, material coordinator, oversees a robot putting staple packages into each box at the end of the assembly line at Arrow Fastener in Saddle Brook on Sept. 20, 2018. Mitsu Yasukawa/Northjersey.com

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In addition to the tariffs on raw materials, Arrow Fastener also will be hit by the Sept. 24 tariffs on finished goods, because about 35 percent of the tools it sells are imported from China, and included on the latest tariff list.

Like many manufacturers, “we’ve got our fingers crossed and are hoping this is going to go away,” DuBoff said.

Marcia Frieze, chief executive officer of Case Medical, Inc. on Empire Boulevard in South Hackensack, also feels her manufacturing company has been put in a position that makes no sense.

Case Medical, which makes metal containers to transport and sterilize medical and surgical instruments, has always bought high-grade specialty aluminum and steel in the United States. But since the tariffs on imported metal were imposed in March, the company has seen its U.S. supplies dry up to the point where Case Medical may need to start buying from foreign suppliers.

Industries that use large amounts of aluminum and steel, such as auto and airplane manufacturers, have begun buying from domestic mills to avoid the tariffs on Chinese metals, and those large orders “have sucked up all the mill capacity,” Frieze said. “So smaller buyers or specialty grades like ours get pushed down the queue.”

Virgilio Delarosa of Union City is racking parts to be nylon coated in the manufacturing facility at Case Medical, Inc. in South Hackensack, NJ on Tuesday, September 25, 2018.(Photo11: Danielle Parhizkaran/NorthJersey.com)

Case Medical had standing orders to receive monthly metal deliveries this year, orders that were placed in 2017. But starting in January, perhaps due to hoarding by major manufacturers in anticipation of tariffs, one of the company’s largest suppliers began missing deliveries.

During July the company did not receive any raw material deliveries, said James Beltis, Case Medical's chief financial officer. They were able to maintain production with metal they had on hand, but supply levels got “really razor thin,” he said.

Forced to look overseas

For Case Medical, the tariff problem so far has been lack of supply, not added cost. But as a result of the short supply of U.S. steel and aluminum, the company needs to find international sources of those metals to ensure they can keep their machines stamping out surgical trays, containers, and carts.

“So the reality of the tariffs is we’re seeing companies that bought American have to look elsewhere,” Frieze said.

Case Medical had been on a growth spurt before the tariff-induced materials shortage, but since it began has reduced staff by about 5 percent.

Alejandro Goycochea of Paterson is forming a MediTray sterilization basket using a press brake in the manufacturing facility at Case Medical, Inc. in South Hackensack, NJ on Tuesday, September 25, 2018.(Photo11: Danielle Parhizkaran/NorthJersey.com)

The 26-year-old company has 140 employees. Its products are used in one-third of the hospitals in the United States, and its biggest customers are the Veterans Administration and the Department of Defense.

Another counterproductive result of the tariffs, Frieze and Beltis said, is that they benefit Case’s competitors, which are largely foreign manufacturers that ship finished products to the United States. Those products are exempt from tariffs when they arrive in this country.

“They make nothing in the United States. They’re not hiring American workers,” Frieze said, “while we’re here, trying to provide jobs and training. I just got a call from Bergen Tech High School - they want us to take on an intern.” The company has also sponsored student work teams from New Jersey Institute of Technology, and hired them as employees for its software development staff.

State survey

The New Jersey Business and Industry Association polled its members in August about the impact of the tariffs.

Forty-one percent of those polled said the tariffs were hurting their bottom line. Another 22 percent said their profits will suffer if the tariffs continue. Close to two-thirds of those businesses said they already have, or will be, raising prices to offset increased costs.

Still, close to 42 percent of the members polled said they support tariffs to counter trade practices that are unfair to the United States. Another 34 percent said they do not support tariffs if they put U.S. companies at a competitive disadvantage.

Harry Epstein, owner of Marine Electric Systems, a company that makes instruments for U.S. aircraft carriers and submarines in its South Hackensack factory, has seen price increases roll in for metal raw materials and electronic components he needs, but he looks at those added costs as “short term pain for long term gain.”

“I think we should all pony up to the bar and tighten our belts and do what we’ve got to do to bring jobs back to the United States,” he said.

The company, started in Brooklyn 76 years ago, has roughly 45 employees, does between $7 million and $10 million annually in sales, and has just signed a new 10-year lease on its South Hackensack facility.

“I don’t think anybody can beat us in a trade war,” Epstein said, “because we don’t export much to China, certainly not as much as China exports to us.”

Marine Electric is a sole source supplier to the U.S. Department of Defense, and he acknowledges he is not in the same competitive situation as other New Jersey manufacturers. But when his company increases prices, he must answer to the government and show that the increases were warranted.

At PTC Electronics in Wyckoff, hit hard by the 25 percent tariff on electronic components, the new trade policy could threaten the business.

The company, founded in the 1970s, imports sensors and devices called load cells from China that are used to make commercial scales, such as the baggage scales used at airports.

The tariffs on electronics applies to 90 percent of the company's business, said President Alan Kicks, whose father founded the company. Load cells used in this country are mostly made in China, and subject to the tariffs. Margins were already tight. “Now with the tariffs the margins are at zero,” Kicks said. “You can’t operate a business that way.”

If he passes on the cost of the tariffs, customers will switch to load cells imported from countries such as Pakistan or India that are not subject to the tariffs.

The company employs five people, but if it were to go out of business the impact would have a wide ripple effect, Kicks said.

“We’re a distributor so we supply downstream, and our customers are all affected by what happens to us," he said. "If we suddenly can’t supply them – we have an active customer list of 400 customers – every one of them gets affected.”

Economic driver

A protracted trade war could be detrimental to the Port of New York and New Jersey's facilities in Newark and Elizabeth, and New Jersey's warehouse industry.

Port real estate specialists said demand for space near the port is high and space currently is tight, but companies that do business in the area are wondering about possible long-term impacts of trade shifts.

The port has adopted an expansive roadway capital program to improve its network of vital roadways serving Port Newark/Elizabeth and Port Jersey. Every facet of this program has increased traffic flow and enhanced safety standard. #portnynj#portspic.twitter.com/gZu2xntx2K

Import volumes were higher than normal in July, they said, possibly due to retailers bringing in products early to beat the tariffs on consumer goods that went into effect Sept. 24.

“The port impacts everything in the Northeast region,” said Russ Verducci, vice president of the commercial real estate firm NAI James E. Hanson. “It’s definitely one of the larger economic drivers for the overall area.”

It's a negotiating strategy

Siamack Shojai, dean ofWilliam Paterson University's Cotsakos College of Business, believes Trump is using the tariffs “as a negotiating strategy and tactic to bring the other side to the table and bring to their attention that our trade deficit cannot continue to grow.”

From a micro-economics point of view, Shojai said, some firms, particularly small firms, may be hurt. “Yes, you may lose some jobs in those small manufacturing firms,” he said. “But I think President Trump is looking at the big industries like the steel industry and aluminum industry. He’s hoping to create jobs there.”

Kicks, of PTC Electronics, has a different view.

“Tariffs have never succeeded in this country,” he said. “You can go back 150 years.

"Yes we’ve been treated unfairly with some of our knowledge-based items,” he said. “But it’s the Walmarts of the world that have caused this – where people want lower prices,” and companies sought out China to get things made for less.

What's next?

Theresa Rodriguez, packer, puts staples in the final packages on the assembly line at Arrow Fastener in Saddle Brook on Sept. 20, 2018.(Photo11: Mitsu Yasukawa/Northjersey.com)

As the two superpowers battle it out, DuBoff at Arrow Fastener has promised his staff that he won’t make any decisions on job cuts until after Jan. 1. He has applied twice for an exclusion from tariffs for his raw materials, and is waiting for a decision.

“What I would hate to do is lay people off and find out a month later that the tariffs are lifted and we reach a trade deal with China,” he said. “We care about these people. We understand they have families. We understand they have expenses. And we don’t want them to lose their jobs.”

Harry Epstein in South Hackensack will shoulder the added costs and make do in hopes it will lead toa lower trade deficit and better future.

Alan Kicks in Wyckoff hopeshis company can hold out long enough for the trade war to end.

Case Medical, Inc. in South Hackensack employs some 140 workers, 100 of whom work in manufacturing the sterilization containers and carts the company sells.(Photo11: Danielle Parhizkaran/NorthJersey.com)

At Case Medical, Frieze will be looking for new sources of metals, possibly overseas, if U.S. suppliers can’t accommodate her orders. She prefers to source her materials as locally as possible, ideally from businesses in New Jersey.

“We always try to use someone locally,” she said. “You never want to be an island unto yourself.”